Suppli

1. To Avail Suppliers Credit contact me @
Name: Sanjay Mandavia
Email: sanjaymandavia@gmail.com
Mobile: +919825560186
Blog: http://buyerscredit.wordpress.com/
Suppliers Credit
What is Suppliers Credit ?
Suppliers Credit relates to credit for imports into India extended by the overseas suppliers or
financial institutions outside India.
Usance Bills under Letter of Credit issued by Indian Bank Branches on behalf of their
importers are discounted by Indian Bank overseas branches or Foreign bank. Paying your
suppliers at sight against Usance bills under letter of credits.
Why Required ?
•Suppliers would ask for sight payment where as you want credit on the transaction.
•At times, in capital goods, banks would insist on using term loan instead of buyers credit.
By this way you can avail cheap LIBOR rate funds and your supplier would also not mind
as he is getting funds at sight.
Benefits
For Importer
•Availability of cheaper funds for import of raw materials and capital goods
•Ease short-term fund pressure as able to get credit
•Ability to negotiate better price with suppliers
•Able to meet the Suppliers requirement of payment at sight

2. For Supplier
•Realize at-sight payment
•Avoid the risk of importer’s credit by making settlement with L/C
Process Flow of Transaction
1.With transaction details importer approaches arranger to get suppliers credit for the
transaction
2.Arranger get an offer from overseas bank on the transaction
3.Import confirms on pricing to overseas bank and gets lc issued from his bank, restricted
to overseas bank counters with other required clauses
4.Suppliers ships the goods and submits documents at his bank counters
5.Suppliers Bank sends the documents to Supplier’s Credit Bank.
6.Supplier’s Credit Bank post checking documents for discrepancies sends the document
to importers bank for acceptance
7.Importer accept documents. Importers Bank provides acceptance to Supplier’s Credit
Bank LC guaranteeing payment on due date.
8.Supplier’s Credit Bank based on acceptance, discounts the bill and makes payment to
Supplier.
9.On maturity, import makes the payment his bank and importers bank makes payment
to Supplier’s Credit Bank
Cost Involved
•Foreign bank interest cost
•Foreign Bank LC Confirmation Cost (Case to Case basis)
•Cost for the usance (credit) tenure.
Requirement
•Import transaction under LC
•Inco terms : FOB/CIF/C&F
•Arrangement has to be done before LC gets opened. Incase of Lc already opened,
relevant amendment has to done.
•LC to be restricted to suppliers credit providing bank under 41D clause of LC
•Under Payment Term: 90 days Usance payable at Sight (mention tenure according to
tenure and offer received)

3. Other Factors
At times foreign bank may insist on adding confirmation which would result into additional
cost
RBI Regulations
Suppliers credit is governed by RBI Circular “Master Circular on External Commercial
Borrowings and Trade Credits” Dated 01-07-2011
A) Amount and Maturity
AD banks are permitted to approve trade credits for imports into India up to USD 20 million
per import transaction for imports permissible under the current Foreign Trade Policy of the
DGFT with a maturity period up to one year (from the date of shipment). For import of capital
goods as classified by DGFT, AD banks may approve trade credits up to USD 20 million per
import transaction with a maturity period of more than one year and less than three years
(from the date of shipment). No roll-over/extension will be permitted beyond the permissible
period. AD banks shall not approve trade credit exceeding USD 20 million per import
transaction.
b) All-in-cost Ceiling
The current all-in-cost ceilings are as under : All-in-cost ceilings over 6 Libor (* for the
respective currency of credit or applicable benchmark) for the tenure upto 3 years has been
capped at 200 bps
The all-in-cost ceiling include arranger fee, unfront fee, management fee, handling /
processing charges, out of pocket and legal expenses, if any.
C) Guarantee
AD banks are permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU)
/Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution, up to
USD 20 million per transaction for a period up to one year for import of all non-capital goods
permissible under Foreign Trade Policy (except gold, palladium, platinum, Rodium, silver
etc.) and up to three years for import of capital goods, subject to prudential guidelines issued

4. by Reserve Bank from time to time. The period of such Letters of credit / guarantees / LoU /
LoC has to be co-terminus with the period of credit, reckoned from the date of shipment.